«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»
(3) by other means not prohibited by international agreement, as the court orders.70 The same rules apply for foreign corporations.71 As distinct from civil cases, a summons for an individual in a criminal case can only be served “within the jurisdiction of the United States or anywhere else a federal statute authorizes an arrest.”72 Rule 4(c)(3)(C) of the Federal Rules of Criminal Procedure provides that, for corporations, [a] summons is served on an organization by delivering a copy to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process. A copy must also be mailed to the organization’s last known address within the district or to its principal place of business elsewhere in the United States.73 Thus, the criminal rules provide none of the means to serve an individual or corporation in a foreign country that are available in civil cases. However, it does impose an additional mailing requirement.
The issue of integrating Rule 4(c)(3)(C) into situations involving a foreign party’s activity in the United States absent a physical presence is
still relatively new. District courts that are confronted with the problem seem quick to point out the deficiency of service, but struggle to provide a solution to the problem. Some courts have provided for creative means for fulfilling the service requirement that are not generally available in the civil context.74 Some merely defer the issue, while expressing doubt that any alternate methods will provide the necessary solution to fulfilling the service requirement.75
1. United States v. Johnson Matthey PLC76
In this case, the court quashed service when the government attempted to serve a criminal summons on a foreign corporate defendant by mailing a copy of the summons to the last known address of the wholly-owned subsidiary of the defendant within the United States.77 The defendant never had an address or place of business in the United States, so the court ruled that the government failed to satisfy the mailing requirement of Rule 4 of the Federal Rules of Criminal Procedure.78 Although the court quashed service in this case, it did not instruct the parties as to how service could be properly met.79 The court only suggested that the parties turn to the mutual legal assistance treaty between the United Kingdom and the United States for guidance.80
2. United States v. Chitron Electronics Co.81
In this case, the court found that service of process on the president of the defendant’s subsidiary company located in the United States was sufficient to satisfy service on the parent corporation in China.82 Generally, in a civil context, service of process on a wholly-owned subsidiary does not satisfy proper service requirements.83 However, in this case, because the subsidiary in the United States (1) “[had] minimum contacts with the foSee discussion infra Part I.D.2–3.
75 See discussion infra Part I.D.1.
76 United States v. Johnson Matthey PLC, No. 2:06-CR-169 DB, 2007 WL 2254676 (D. Utah Aug. 2, 2007).
77 Id. at *2.
79 See id.
80 Johnson Matthey, 2007 WL 2254676, at *2; see generally Treaty Between The United States and United Kingdom and Northern Ireland on Mutual Legal Assistance on Criminal Matters, U.S.–U.K., Jan. 6, 1994, T.I.A.S. No. 96-1202, available at http:// commcns.org/13Jvyw0.
81 United States v. Chitron Elecs. Co., 668 F. Supp. 2d 298 (D. Mass. 2009).
82 Id. at 306.
83 Id. at 304–05.
rum” and (2) acted as a “mere conduit for the activities of its parent,”84 the court allowed the government to pierce the corporate veil85 and serve the parent corporation.86
In this case, as in Chitron, the court recognized that “there is no litmus test for determining whether a subsidiary is the alter ego88 of its parent.
Instead, [the Court] must look to the totality of the circumstances.”89 The court interpreted the silence of Rule 4 of the Federal Rules of Criminal Procedure regarding the alter ego, alongside the spirit of Rule 2 of the Federal Rules of Criminal Procedure,90 to find that service was proper when the government served the president of the defendant parent corporation’s subsidiary within the United States.91 In this case, the court determined that the defendant parent corporation had sufficient notice of the indictment against it, and by serving the president of its subsidiary at its office in the United States, it was “reasonable to assume that [the managing agent] would transmit notices to [the parent corporation].”92
4. United States v. Alfred L. Wolff GmbH93
In this case, the court quashed service when the government attempted to serve the attorneys of the defendant corporation’s subsidiary in the United States.94 The court held that unlike the circumstances in Chitron and Public Warehousing Co., the government failed to demonstrate that the 84 Id. at 305 (quoting Stanley Works v. Globemaster, Inc., 400 F. Supp. 1325, 1332–35 (D. Mass.
85 For a further discussion of piercing the corporate veil, see infra Part II.A.2.
86 Chitron, 668 F. Supp. 2d at 306.
87 United States v. Pub. Warehousing Co., No. 1:09-CR-490-TWT, 2011 WL 1126333 (N.D. Ga.
Mar. 28, 2011).
88 For further information on the alter-ego doctrine, see infra Part II.A.2.
89 Pub. Warehousing, 2011 WL 1126333, at *6 (alteration in original) (quoting United Steelworkers of America v. Connors Steel Co., 855 F.2d 1499 (11th Cir.1988)).
90 Rule 2 of the Federal Rules of Criminal Procedure provides that “[t]hese rules are to be interpreted to provide for the just determination of every criminal proceeding, to secure simplicity in procedure and fairness in administration, and to eliminate unjustifiable expense and delay.” FED. R. CRIM. P.
91 Pub. Warehousing, 2011 WL 1126333 at *7.
92 Id. at *5 (quoting Heise v. Olympus Optical Co., 111 F.R.D. 1, 6 (N.D. Ind. 1986)); see id. at *8.
93 United States v. Alfred L. Wolff GmbH, No. 08 CR 417, 2011 WL 4471383 (N.D. Ill. Sept. 26, 2011).
94 Id. at *1.
2014] INNOVATIONS IN CRIMINAL COPYRIGHT INFRINGEMENT 501 subsidiary was the alter ego of the parent corporation.95 The government failed to articulate a sufficient relationship between the parent and subsidiary with, for example, the extensive daily interactions and several financial entanglements found between the subsidiary and parent in Public Warehousing Co.96 E. Pending Cases are Stuck on the Issue, Searching for Plausible Solutions Three recent cases, still in district court, have presented the service of process dilemma. The district courts have considered such alternatives as using international agreements or the alter-ego doctrine,97 but are struggling with establishing a viable means by which the government can effectuate service in difficult circumstances where foreign corporations are directing criminal activities to and having effects in the United States.
1. United States v. Dotcom98
The U.S. District Court for the Eastern District of Virginia is struggling with this issue in United States v. Dotcom. In January 2012, the government indicted Kim Dotcom, along with seven other individuals, in one of “the largest criminal copyright cases ever brought by the United States.”99 Dotcom founded Megaupload, a file-sharing website, and has used the website for profit by distributing massive amounts of pirated files.100 Although the file-sharing site can be used for legitimate purposes, many of the files being shared are copyrighted material, the distribution of which is not authorized by the copyright owners.101 Dotcom and the other defendants are charged with being part of a massive, worldwide organization engaged in criminal copyright infringement that has caused more than an estimated $500 million in damages to copyright holders.102 Megaupload is a Hong Kong corporation with no U.S. offices or agents. Among others, one issue in this case is whether the government can 95 Id. at *7.
97 See infra Part II.A.2.
98 United States v. Dotcom, No. 1:12-cr-3, 2012 WL 4788433 (E.D. Va. Oct. 5, 2012).
99 Justice Department Charges Leaders of Megaupload with Widespread Online Copyright Infringement, DEP’T OF JUSTICE, (Jan. 19, 2012), http://www.justice.gov/opa/pr/2012/January/12-crmhtml.
100 Superseding Indictment at 1–5, United States v. Dotcom, No. 1:12-cr-3, 2012 WL 4788433 (E.D. Va. Oct. 5, 2012), 2012 WL 602594.
101 Id. 7.
102 Id. 1–2.
properly serve the corporation with process when the corporation has no U.S. offices or even subsidiaries in the United States. Regarding the Megaupload case, District Judge Liam O’Grady has said, “I frankly don’t know that we are ever going to have a trial in this matter.”103
2. United States v. Pangang Group Co.104
United States v. Pangang Group Co. appeared before the U.S. District Court for the Northern District of California. In this case, the court quashed service, explaining that the “only way for the [g]overnment to show that it has complied with the mailing requirement, is to show that [its subsidiary] is the alter-ego” of the defendant in this case.105 The court concluded that the government failed to show that the subsidiary was the alter ego of the defendant.106 The court also acknowledged that a mutual legal assistance agreement may not be a viable alternative and that the government may be without a means to effect service on the defendant.107 The case has not yet been decided.
3. United States v. Kolon Indus., Inc.108
The United States District Court for the Eastern District of Virginia is dealing with yet another corporation that does not have a last known address or principal place of business in the United States. Although both parties agree that the delivery requirement must be fulfilled before the court can have jurisdiction over the case, the court struggled over whether the United States government could possibly comply with the mailing requirement.109 The court suggested that the mailing requirement is but an additional mechanism for providing notice of service effected in satisfaction of the service requirement, and is not a necessary prerequisite of valid service or exercising jurisdiction.110 In this case, the court quashed the United
103 Joe Coscarelli, Megaupload Founder Kim Dotcom Might Never Go to Trial, NYMAG.COM
(Oct. 13, 2012, 5:02 PM), http://nymag.com/daily/intel/2012/04/megaupload-founder-kim-dotcommight-never-go-to-trial.html.
104 United States v. Pangang Grp. Co., 879 F. Supp. 2d 1052 (N.D. Cal. 2012).
105 Id. at 1066.
106 Id. at 1066–69.
107 Id. at 1069.
108 United States v. Kolon Indus., Inc., No. 3:12cr137-01, 2013 BL 49906 (E.D. Va. Feb. 22, 2013).
109 See id. at *3–4, *23.
110 Id. at *5–6. The court stated, “It is doubtful that Congress would stamp with approval a procedural rule permitting a foreign corporate defendant to intentionally violate the laws of this country [thereby causing harm to its citizens], yet evade the jurisdiction of United States’ courts by purposefully 2014] INNOVATIONS IN CRIMINAL COPYRIGHT INFRINGEMENT 503 States government’s initial attempts at service of process, but left open the possibility that service could be effected via a mutual legal assistance treaty with South Korea, where the corporation is located.111 II. ANALYSIS A. Potential Solutions to the Service of Process Problem This section discusses potential alternatives to facilitate the service requirement. These alternatives are generally available in the civil context.
However, these alternatives are not always a perfect fit for the criminal context and do not necessarily guarantee a practical solution to the delivery and mailing requirement problems of Rule 4(c)(3)(C).
1. Waiving Service
If the defendant cannot be properly served, then the case may never be brought before the court.112 Thus, to effectuate the judicial process in sometimes impractical situations, Rule 4 of the Federal Rules of Civil Procedures provides a means for waiving service. Rule 4(d) provides that “an individual, corporation, or association... has a duty to avoid unnecessary expenses of serving the summons. The plaintiff may notify a defendant that an action has been commenced and request that the defendant waive service of a summons.”113 Unlike Rule 4 of the Federal Rules of Civil Procedures, Rule 4 of the Federal Rules of Criminal Procedure does not provide for waiver of service of process, perhaps to preserve the guarantee of due process in criminal cases through an arrest warrant or summons.114 Even if the defendant could waive service of process, it is not likely that he would. Not only is this option unfair to the defendants, who are entitled to due process of law, but it provides the defendants no incentive to waive service.
failing to establish an address here.” Id. at *6 (quoting United States v. Dotcom, No. 1:12-cr-3, 2012 WL 4788433, at *1 (E.D. Va. Oct. 5, 2012)).
111 Id. at *23.
112 Mem. of Law in Support of Mot. of Specially Appearing Def. Megaupload Ltd. to Dismiss Indictment for Lack or Personal Jurisdiction at 7 n.3, United States v. Dotcom, No. 1:12-cr-3, 2012 WL 4788433 (E.D. Va. Oct. 5, 2012) (No. 115), 2012 WL 2885911.
113 FED. R. CIV. P. 4(d)(1).
114 FED. R. CRIM. P. 4(a).